Management Accounting for Zylla Company

The assignment requires an in-depth examination of the importance of management accounting for Zylla company. It involves analyzing various accounting methods and tools that can help the company manage risk, determine costs, and make effective decisions. The document also explores how implementing a management accounting system can lead to strategic management and sustainability.

Management Accounting

Table of Contents
INTRODUCTION..........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Various types of accounting system and its necessary requirements...............................1
P2: Different method of accounting reporting system ..........................................................3
M1: Benefits of management accounting systems and their application...............................4
D1: Critical analysis of reporting system ..............................................................................5
TASK 2............................................................................................................................................5
P3: Various costing techniques used to determine net profit ................................................5
M2: Utilisation of accounting techniques...............................................................................6
D2: Critical evaluation of income statement ........................................................................7
TASK 3............................................................................................................................................7
P4. Use of planning tools in budgetary control......................................................................7
M3: Evaluation of planning tools.........................................................................................10
D3: Tools used for resolving financial issues.......................................................................10
TASK 4..........................................................................................................................................10
P5: Various measures to resolve financial problems............................................................10
M4: Analysis of financial problems.....................................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Management accounting is an important measure use by an organisation in order to
analyse financial statements of the company. Various reports related with financial data as well
as other parts of information are intendant as primarily to assist accountant in attaining objectives
of an organisation (Arjaliès and Mundy, 2013). Generally, a accounting system is an essential
facet those are helpful in controlling operations that are being perform on regular basis. Some
accountant describe MA to be the perfect application that is based on certain principles in order
to create, control, protect and enhance value for shareholder.
It needs identification, preparation and interpretation of useful data in order to take
valuable decision making. Use of accounting and reporting system as important tools are more
effective for the company. In order to analyse net profit during the year are generated by using
specific costing method. Understanding of planning tools those are helpful at the time of
budgetary control. Further, this report will examine certain financial issues those are arises in an
organisation and measure to rectify them are clearly explain under this particular project report.
TASK 1
P1: Various types of accounting system and its necessary requirements
In every business organisation whether small or medium size needs to have specific
accounting systems. This will be helpful in order to maintain their every day financial transaction
in more systematic manner. Management accounting system is one of the types of systems which
is use to record financial data. A single entry system under which only one entry is recorded for
every financial transaction which is the most simplest form of accounting. This is mainly said to
be perfect techniques for mid size organisation such as Zylla Ltd (Bebbington, Unerman and
O'Dwyer, 2014). Because there is very less amount of transaction and assets to be recorded. It is
crucial for the purpose of making future forecasting of estimated profits.
It has been seen that managing the accounting data and reports in such perfect manner is
the primary aim of accounts managers in order to make crucial decision regarding future
sustainability of Zylla operations. If company is using corrective system to record transaction
they are at very good position to operate business in more effective and efficient manner. All
these are primarily essential for make proper balance among past and previous year
performances. It is the responsibility of managers to contribute their valuable efforts in proper
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allocation of resources. They need to analyse and monitoring every accounting data in order to
minimise risk of uncertainty and make plan for incurring maximum profitability. However, role
of accountant is to make use of proper accounting systems in order to make success of Zylla
company in order to attain long term objectives for an organisation. In order to take decision-
making for the purpose of controlling cost and all those expenses which are incur by company
during the period of time. It is necessary for managers to make financial reports on the basis of
selected information. It will be crucial for making certain improvement in current technologies
and implement modified techniques in accordance to get better results in coming times.
Purpose of management accounting is to make use of accounting system while recording
of various financial transactions those are incur by the company during the time (Cadez and
Guilding, 2012). The information collected by managers can helpful in order to make crucial
decision-making regarding enhancement of performance and growth of the company.
Types of accounting system: There are certain accounting system which is helpful in
recording of financial transaction of the cited company. Likewise, managers needs to make use
of those while recording of entries into accounts statements. Some of them are:
Cost accounting system: It is known as a systematic design used by an organisation in
order to estimate total cost of their goods for the purpose of profitability analysis. According to
this particular system, managers use to record all those income and cost that are incur by Zylla
company during production of product and services. In this accounting system, accurate cost of
products is analyse and recorded in order to determine total gain from the operations.
Inventory management system: According to this particular system which is use for the
purpose of keeping proper record of stock level in the company. The primary objectives of
managers is to control and maintain total cost of stock for the purpose of incurring high
profitability. It the managers who look all the records whether to order extra stock and total cost
of ordering. By the help of this, excess of wastage and cost can be control up to an extent.
Job costing system: Under this particular accounting system Zylla company use to
analyse total cost of manufacturing each units are determine. It is the primary role of managers to
develop a job cost which is use only when the products that produce are entirely different from
each other. It is mainly use for the purpose of allocating costs to an individual projects of a
company.
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Price optimisation system: It is the use of numerical analysis done by company in order
to determine about various prices those are charge by company for their particular products. It is
use to analyse about customers responses about various prices those are being charge for various
products and services. It is also essential for the managers to analyse best suitable price which is
being charge by Zylla company in order to maximise operating profit.
P2: Different method of accounting reporting system
It is necessary for every business entity to making valuable report on the basis of data
collected by managers from various sources. Every report is essential for the company in order to
make curial decision-making about future growth and sustainability. The role of financial
accountant is to make necessary report that is submitted to the shareholder and higher authorities
for making investment decision. Management accounting reports are important tools which
provides the information regarding different important aspects of company (Fourie and et. al.,
2015). These reports have the large number of importance for the manager of Zylla company as
it provides basic information regarding preparation of important policies and plans. These
different reporting methods are also considered as the important risk management tool which
helps in continuous monitoring of the transaction of employees and removal of the problems
faced by them. This will contributes in improvement of the performance of employees and
productivity of the company. All these reports are prepared in frequent intervals depends upon
the requirement of the management (Management Accounting Research Interest Group, 2017).
The different reports which are prepared by the accounting officer of Zylla company and their
relevance for management are mentioned below:
 Budget report: This report includes the process of preparation of different budgets
which helps the managers in appraisal of the performance of different departments and
control the unnecessary costs which are incurred on wasteful products. These budgets are
prepared by accounting officer on the basis of the prior information. These budgets helps
ion determination of the objectives and disbursement of the roles and duties to each and
every employee. Budgets are like standards which helps in comparison of the actual
performance of employees and determination of deviations. Financial budget helps in
efficiently allocation of the funds to different departments as per their needs. This helps
in reduction of the cost and accomplishment of their targets.
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 Bills receivable report: It is important report which provides the information regarding
the debtors to whom the company is to collect outstanding amount. It is effective tool
which helps in managing the flow of cash and changing their credit policies which is
more beneficial for them. The information provide by this report is used by the manager
of Zyalla company to examine the current collection process of company. It contributes
in preparation of the effective strategies which helps in collection of the amount on time
and reduction on the account of NPA's. This also provides the opportunity regarding to
give focus on their old debts and adopt the measures to recover them.
 Job cost report: It is considered as the important report which helps in identification of
the cost which is incurred in the completion of specific project. Such identification of
cost is compared with the revenue which is going to earn by organisation from such
specific project (Hülle, Kaspar and Möller, 2011). This helps in determination of the
profitability which is earned by company through particular job. Using of these report
provide the opportunity to the management of Zyalla company to find out the such areas
which are more profitable. This helps in focusing on such areas which provides more
return to company and improves their profitability. It contributes to removal of costs from
such processes which are not beneficial and saves their important time and money.
Evaluation of this report helps in correction of the area where the waste activities are
prevail before the increment of cost. It has maximum benefits derived by organisation is
on their operation and functions by optimum utilisation of existing resources.
 Inventory and manufacturing report: This report has large number of importance in
managing the physical inventory of zyalla company. This provides the opportunity
regarding make their manufacturing processes more effective and efficient. This will
have large importance in accomplishment of their objectives and targets. Effective
management of inventory helps in providence of materials to different departments and
improves their productivity.
M1: Benefits of management accounting systems and their application
The large number of benefits are derived by the management of Zyalla company due to
the adoption of management accounting systems are mentioned below:
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 Reduction of cost: Different costing system helps in identification of important
information. This provides opportunity regarding reduction of cost by adoption of
appropriate strategies.
 Improved financial return: Such accounting system provides the information regarding
the tastes of customers and the strategies adopt by competitors. This helps in
improvement of their production process and increase their financial return.
D1: Critical analysis of reporting system
In has been seen that without having proper reporting system no any decision can be
analysed. It is necessary for the company's to make use of financial transaction from various
sources of the department. It is more effective techniques which is useful for Zylla company to
record daily transaction. With the use of reporting system profitability and efficiency can be
enhance and future impacts can be control in more effective manner. By this, aims of the
company can be attain more easily without making any extra costs.
TASK 2
P3: Various costing techniques used to determine net profit
Cost accounting and management systems is one of the branch of management
accounting. There are various type of organisation engaged in producing product and services.
Cost method are used to ascertain the cost of product and services subject to increasing the
profitability (Quagli, 2011). Unit costing, job costing, contract costing, batch costing, operating
costing, multiple costing, uniform costing are the types of cost methods used in manufacturing
and service providing organisation. Below are the major cost methods are defined in subject to
evaluating profitability.
Marginal Costing
Marginal costing is defined to be a tool of costing in accounting. It generally refers to the
cost which has been incurred as per units of cost. The total cost incurred by a business is
categorised on grounds of Fixed and variable cost. The fixed costs remains same whereas
variable cost of varies with amount of units to be produced. The amount which has been incurred
by business to produce an additional commodity is referred to as marginal cost. The concept of
Marginal costing have been helpful in determining price and profitability of the product.
Absorption Costing
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Absorption costing is a contemporary approach in which fixed and variable costs are
apportioned to the various cost centres. In simple words, it can be considered as technique of
costing which is mainly used in decision making. The main cause behind using this kind of
approach is that it allows attention of management. This costing method is useful in estimating
costs and profits per job as expenses and revenue are apportioned. This costing tool is also
employed when a business is looking to control costs of production. The major drawback of this
approach is that it is a bit complex therefore preferred less by organisations.
Computation of Net profit by using absorption costing
Income statements
Particulars Amount
Sales 35*500 17500
Less:
Production cost 6+5+2+3 = 16*500
8000 8000
Gross profit 9500
Less:
Variable sales overhead 500*1 500
Selling and administrative cost expenses (800+400) 1200 -1700
Total Profit / Loss 7800
Calculation through marginal costing using
Income statements
Particulars Amount
Sales 35*500 17500
Less:
Production cost 6+5+2 - 7800
Closing stock: 100*13 - 1300 -6500
Contribution 11000
Less:
Variable sales overhead 500*1 500
Fixed overhead -1800
Selling and administrative cost expenses (800+400) -1200 -3500
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Total Profit / Loss 7500
M2: Utilisation of accounting techniques
There are certain factors which are affecting the financial position of Zylla company.
Some of factors those are related with internal and external department. However, manages
require to implement various accounting tools in order to reduce financial mistake and errors
those are crucial for the purpose of making effective decision-making.
D2: Critical evaluation of income statement
In order to make generate more better results in coming time for zylla company. There
are two effective methods of costing which is helpful in evaluating net profit of the company.
The difference of 300 is arises because of fixed expenses adjustments.
TASK 3
P4. Use of planning tools in budgetary control
Budget: It is a financial plan which is prepared on the basis on forecasting the income
and expenditure incurred in future business activities of an organisation. The manager of
company is held responsible to fix certain amount of money for specific business activities that
will help them in getting positive outcomes (Renz, 2016). Thus, budget preparation help
company in reducing wastage and utilising available financial resources at an optimum manner.
Budgetary control: It is a process of controlling and monitoring the financial resources
used for future planned activities in such an effective manner that will help company in getting
positive result. The manager of company is liable to make comparison actual result with
expected result in order to determine the future profitability (Kotas, 2014). Through budgetary
control system the manager can easily find out the deviations and problems that may arise while
future business activities and accordingly take corrective measures to overcome such problems
which help in reducing the excessive usage of financial resources in different business activities.
Planning tools: It refers to effective tools and techniques which is required to manage
and control budget in order to achieve expected desired result. Some planning tools are as
follows:
Budgeting methods:
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Incremental budgeting: It is known as one of the crucial budget which is prepared by
using last period's budget or actual performances as a basis with incremental costs included for
new budgeted period (Strumickas and Valanciene, 2015). There are some useful aspects those
are associated with this types of budgets are mention underneath:
 The proper allocation of resources is relies upon allocation from the last year.
 By the help of this approaches manager cannot recommended as they fails to explain to
takes into account changing situations.
 It would encourages total spendings up to the budget to make reasonable allocation in
next period.
Advantages:
 It is more stable and constant but it change gradually.
 Managers would operate their departments on a regular basis.
 The system is relatively more easy to operate and understand every aspects those are
helpful in detecting any issues regarding future planning.
 This system is more helpful in solving conflicts if arises in departments that can seen to
be treated similarly.
Disadvantages:
 It assume activities and techniques of working that will be continues in same common
way.
 No changes of any incentive for formulating new ideas of improvement.
 The budget can become out dated and it will no longer associated to the level of activities
or different types of work being formulated during the period of time.
 The priority for resources can be changed thus, budgets were set at real costs.
 There is no any incentives provided to reduce costs.
 It increase spending up to the budget so that the budgets is more next year accordingly.
Zero based budgeting: It is known as budgeting techniques that allocate funds based on
program efficiency and its necessity those are rather than budget history. As its opposed to
traditional budgeting no items is automatically consists in the next budgets. Under this, person
use to make reviews of every program and expenses at the beginning of each budgeted period. It
must be justify that each items in order to retain funding. Budgeting can utilize ZBB to any kind
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of cost, capital expenses and operation expenditure and administrative costs or COGS
(Vakalfotis, Ballantine and Wall, 2013).
Advantages
 It results budgets in well justified and aligned to strategic planning.
 This would catalyses broader cooperation across the organisation.
 It would help to improve operational efficiency by facing various challenging of
assumptions.
 This budgets activity would cost reduction by avoiding automatic budgets can enhance
that are often resulting in savings.
Disadvantages:
 It is to costly and complex as well as time consuming because budget is rebuilt from
scratch annually, whereas more faster traditional budgeting can requires proper
justification which can only applicable for incremental costs.
 It may be cost-prohibitive for every organisations with specific funding.
 The execution challenges related to budget period timing is more constraints.
Activity based budgeting: It is one of the crucial method of budgeting under which the
activities that incur in every functional areas of an organisation those are recorded. There is a
relationships which defined and analysed accordingly. It does not simply adjust prior budgeting
to account for inflation and other business developments (Ward, 2012).
Advantages:
 It is followed for better degrees of control over the budgeting process.
 Revenue and expenditure planning can occurs at a finer level that would provide valuable
information regarding project examination.
Disadvantages:
 It is more costly, if it has been compared to as traditional budgeting techniques. It needed
more information and time for management.
 It require more assumptions and insight from administrations.
Process of budget controlling:
Discuss with managers of different departments: It is required for managers of different
departments of company to communicate with each other and discuss about the relevant facts
and informations which will be helpful in performing future business activities.
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Make proper assumptions and declaration: In order to perform planned activities
without facing any problems the manager should make assumptions related to cost incurred in
future production process through which they can ready with abundant financial resources to
face such challenges.
Set systematic information for budget to achieve objectives: It is the responsibility of
manager to collect information and data from each department which is required in preparing
budget for future business activities.
Measurement of actual with standard: Manager need to measure actual performance by
comparing actual data with the expected data which help them in identifying deviations and
problems that may occurred during performing planned activities (Herzig and et.al. 2012).
Review stages: It is the last and final stage where the managers review and analyse the
budget and check whether any changes made or not to complete business activities.
M3: Evaluation of planning tools
It is important for the Zylla to analyse performance of company through using master
budget, cash budgets etc. and accordingly adopt an effective planning tool among various
planning tools which help them to achieve positive result. Operating budget is very useful for
company in analysing total revenue and cost expenditure incurred in production process of each
units. The company can achieve huge profit only when the manger prepare cash budget and static
budget which also help them in managing the financial resources and controlling the irrelevant
cost incurred in future business activities.
D3: Tools used for resolving financial issues
An organisation who faces financial crisis will need to implement effective and efficient
tools and methods which help them to compete with their competitors. The survival of company
may comes in danger if the manager fail to manage and control financial risk. Thus it is
important for company to maintain and check accounting and financial reports on regular basis
and identify the chances of the facing financial losses with a motive of eliminating them in an
organised manner.
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TASK 4
P5: Various measures to resolve financial problems
The company should be financial capable to operate business activities more smoothly.
Thus it is important for manager of company to arrange and utilise funds in such an optimum
manner that will help company in facing future challenges in an effective and efficient manner.
As there is huge competition in competitive market world and in order to compete with them the
company should required to adopt effective plans and strategies and it can be possible only when
the company has enough financial resources. Implementing new techniques and tools requires
huge fund therefore it is responsibility of manager of company to allocate funds in different
business activities on the basis of their outcomes otherwise lack of financial resources decreases
the stable position of company in competitive market world.
Appropriate techniques which is used by manager to eliminate financial issues:
KPI: Key Performance Indicator helps manager to track and monitor factors which affect
the success of an organisation. Through KPI the company can able to determine that whether
they will achieve its desired objectives within given period of time or not. As KPI is different for
different organisation on the basis of their desired goals. For example a school has an objective
to pass course but if they fail then they may use KPI in order to determine their actual position
whereas, business may use the percentage of revenue earn from the customers as KPI. Thus KPI
play an important tools which help manager and leader of company to analyse the cure4ent
situations and accordingly implement operational changes in order to identify and address their
performance problems. For Zylla company, KPI is used to determine their actual position in
market and whether they will achieve desired objectives within limited period of time or not.
Financial governance: It is related with the standards and guidelines made by
government which need to comply with by company. Failure of adopting and following
government rules and regulation will cause huge damage to company due to which the
profitability of company may also decreases (Otley and Emmanuel, 2013). Thus it is important
for manager of Zylla to have adequate knowledge of government policies and plans in order to
comply with them in an effective and efficient manner.
Benchmarking: The company need to set benchmark which should be achieved within
limited period of time in order to gain competitive advantage in competitive market world. The
manager first need to focus on their competitor's strategy and accordingly set target which helps
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in bringing their company ahead of their competitors. This will help company in getting strong
position and reputation in competitive market and survive for longer period of time.
SMART tools: Through setting SMART goals the company can achieve desired goals in
an effective and efficient manner with the help of employees' contribution and efforts. It is useful
for company in allocating available resources and time in important areas of department where
they get can achieve best maximum result. Through SMART Goal the company can set specific
gaols which can be measurable and achievable within limited period of time in an effective and
efficient manner.
Difference between two companies:
Zylla company Unicorn Grocery
The size of the company is small thus the
manager put their less efforts in managing and
monitoring business activities.
The company is large in size thus it is
important for manager to continue focus on
managing and monitoring business activities in
order to gain competitive advantages.
Financial governance and benchmarking tools
are used by Zylla to manage and control their
financial problems.
Key Performance Indicator is used to analyse
the performance of employees by comparing
actual with expected result.
M4: Analysis of financial problems
As company can survive among large number of competitors only when they have attain
good financial position. Thus having adequate financial resource enable company to resolve
financial issues through implementing various tools and techniques which help company in
getting sustainability and profitability. It is important for Zylla to focus on managing and
investing financial resources in important areas of department where they get positive outcomes.
CONCLUSION
It has been concluded from the above project that every organisation irrespective of the
size and nature, required to managing accounting details and data which is useful in taking
effective decisions. There are also various accounting reporting methods through which manager
implementing corrective actions to manage risk. Various planning tools are also required to be
implemented in order to determine and analyse cost and financial measures to resolve financial
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problems and issues faced by Zylla. The company should get various benefits by adopting
management accounting system such as strategic, risk management etc. which help company in
achieving sustainability and profitability.
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REFERENCES
Books and journals:
Arjaliès, D. L. and Mundy, J., 2013. The use of management control systems to manage CSR
strategy: A levers of control perspective. Management Accounting Research. 24(4).
pp.284-300.
Bebbington, J., Unerman, J. and O'Dwyer, B. eds., 2014. Sustainability accounting and
accountability. Routledge.
Cadez, S. and Guilding, C., 2012. Strategy, strategic management accounting and performance: a
configurational analysis. Industrial Management & Data Systems. 112(3). pp.484-501.
Fourie, M.l .and et. al., 2015. Municipal finance and accounting. Van Schaik Publishers.
Herzig. and et.al. 2012. Environmental management accounting: case studies of South-East
Asian Companies. Routledge.
Hülle, J., Kaspar, R. and Möller, K., 2011. Multiple Criteria Decision‐Making in Management
Accounting and Control‐State of the Art and Research Perspectives Based on a
Bibliometric Study. Journal of Multi‐Criteria Decision Analysis. 18(5-6). pp.253-265.
Kotas, R., 2014. Management accounting for hotels and restaurants. Routledge.
Otley, D. and Emmanuel, K. M. C., 2013. Readings in accounting for management control.
Springer.
Quagli, A., 2011. Goodwill accounting as a missing link between financial and management
accounting: literature review and research agenda. Financial reporting.
Renz, D.O., 2016. The Jossey-Bass handbook of nonprofit leadership and management. John
Wiley & Sons.
Strumickas, M. and Valanciene, L., 2015. Research of management accounting changes in
Lithuanian business organizations. Engineering Economics. 63(4).
Vakalfotis, N., Ballantine, J. and Wall, A. P., 2013. A literature review on the impact of
Enterprise Systems on management accounting.
Ward, K., 2012. Strategic management accounting. Routledge.
Online
Management Accounting Research Interest Group. 2017.[Online]. Available through:
<http://www.lboro.ac.uk/departments/sbe/research/interest-groups/management-
accounting/>.
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